Monthly Archives: October 2015

As part of the probate or trust administration process, the decedent’s debts must be addressed. If there are debt collectors involved, this can be the worst part of the administration process. Although it would be nice, debts do not go away when the debtor passes away. Debts must be paid from the decedent’s estate, if there is enough money. The family members do not become personally responsible for the debt unless a family member co-signed for the debt or was the spouse of the decedent.

Creditors must comply with certain restrictions relating to the debt. Creditors can discuss the debt with the person who has authority for the deceased person, which is typically the executor or personal representative, the successor trustee, or perhaps a family member such as a spouse or parent. The debt collectors must comply with the Federal Fair Debt Collection Practices Act, and they are prohibited from using abusive or deceptive practices in their attempts to collect the debt. The collectors cannot pressure the family to use their own funds to pay the debt, and may not imply that the family must personally pay this liability.

It is always important to verify a debt of a decedent prior to payment. You may request proof of the debt and details regarding the debt owed. You should always ensure that the debt is actually owed prior to making any payments from the decedent’s estate. If a formal probate estate is open, you should always consult with your attorney prior to paying any debt, especially in the case of an insolvent estate to ensure that debts of a higher priority (like taxes) are paid first.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

The Federal Trade Commission has hundreds of calls about a new scam in which people received calls from fake ‘court officials’ about jury duty. In the calls, scammers claimed to be court officers, accused people of skipping jury duty and said they had to pay a fine immediately or face arrest.
The scammers take several approaches at trying to separate you from your money. People reported that some scammers acted like ‘nice guys.’ They offered to ‘review the file’ or said ‘you have a clean record’ and could just ‘make things right’ by paying the fine with a reloadable card. Others took the ‘mean guy’ role. They berated people for ignoring their mail, claimed to be holding an arrest warrant, and told listeners ‘don’t you dare hang up until you buy that reloadable card and read me the code.’ A few extra-greedy scammers told people the first reloadable card ‘didn’t go through’ and demanded a second payment.
The National Center for State Courts says court officers will never call or email you and require payment for failing to appear for jury duty. If you get a summons for jury duty and don’t go, you might get a letter telling you to come to court on certain date to explain why you missed jury duty. If someone asks you to pay a fine for missing jury duty, hang up and call your local court or law enforcement department.

Effective January 1, 2016, but only effective until January 1, 2021, there will be a new option for the transfer of real property without a probate proceeding in California. A Revocable Transfer on Death Deed (RTODD) will now be authorized. A transferor, who has the capacity to contract, may deed property to a clearly identified beneficiary. The RTODD must be signed, dated, notarized and recorded within sixty (60) days of signing to be valid. If recorded, and not revoked, the deed will be effective upon death to transfer the property to the named beneficiary. As this is a revocable transfer, the transferor can always change his or her mind and either name new beneficiaries or simple revoke the prior transfer. The property transferred via the RTODD would remain includable in the transferor’s estate, including for Medi-Cal eligibility and recovery purposes and for the transferor’s creditors.

Although this law is touted as a simple way for a non-probate transfer of a residence, which is used in many other states, there are concerns this law will encourage elder abuse and fraud. As this is a revocable transfer, it is easy to see how lawsuits could emerge if multiple deeds were recorded, or if the transfer conflicted with set estate planning documents. In addition, it would seemingly be very easy for an abuser to have an elder sign such a document.

Consider the following fact pattern. A single widowed gentleman consults his attorney and sets up a general estate plan, including a trust, which leaves all assets equally between the transferor’s son and daughter. He later decides he wants his son to receive the house, so without consulting his attorney, he executes and records a RTODD. After he passes, while the RTODD will now give the house to the son, the trust indicates that all property should be divided 50/50. The son would thus receive 50% of the assets in the trust as well, giving him a windfall, and not giving the daughter an overall equal share of all of the assets. Unless this was the goal, that the son should receive the house in addition to his 50% share, the RTODD has created a potential estate distribution issue that may push the estate into litigation.

Thus, while we do feel that the RTODD is a good option to utilize along with other estate planning options, there can easily be abuses of this new deed option. In order to ensure that the RTODD is utilized properly, and that all requirements are met, a consultation with an attorney is still in order. Please contact our office if you have questions about this deed and whether it is appropriate to utilize it in your planning.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.

The prior, expired tax law allowing for qualified charitable distributions from IRA’s has been revived. This law allows individuals over 70 ½ to exclude from gross income up to $100,000 in Qualified Charitable Distributions from an IRA. This requires a distribution from an IRA directly to a public charity. If done correctly, the individual can exclude the IRA withdrawal from gross income, although no further charitable deduction is allowed. This is a better tax result than claiming the withdrawal as ordinary income and then taking the charitable deduction, as given some other tax limitations the deduction never completely offsets the amount claimed in income even though the whole amount was donated to charity. This change is beneficial for those individuals who would like to donate their required minimum distributions for instance.

Portability Regulations:

We have been reporting in the past few years of changes in the estate tax law and the increase in the estate tax exemption amount to $5,000,000 as of 2011, which is indexed for inflation, and stands now at $5,430,000. For many clients, this larger exemption amount has lessened the concern for estate taxes and often can allow for a less complex trust. One tax planning option is the use of Portability, which is the ability of the surviving spouse to utilize the unused estate tax exclusion amount of the deceased spouse. The IRS has now issued final regulations which apply to decedents dying after June 12, 2015. The regulations confirm that to claim the deceased spouse’s unused exclusion amount (DSUE amount) an executor (not necessarily the surviving spouse) must timely file an estate tax return. As an estate tax return would typically not otherwise be required, this can place a burden on families and the executor to prepare and file a rather complex return. Unfortunately the IRS has not opted to issue a more simplified estate tax return form to claim the election. Whether to file the estate tax return and claim the DSUE amount is a complex discussion that should be part of the trust administration process at the death of the first spouse. Please feel free to contact Sugai & Sudweeks if you have questions about estate taxes or the impact of portability options on your estate planning.

Same Sex Couples – Right to Marry and Tax Implications:

With the Supreme Court ruling that the Fourteenth Amendment requires a state to issue marriage licenses and recognize marriages performed in other states for same-sex individuals, these couples now have tax planning options to consider that were not previously available. All provisions in the code that previously only applied to husband, wife or heterosexual spouses, will now apply to all individuals lawfully married under state law to someone of the same sex. This may necessitate the filing of amended income tax, estate tax and gift tax returns depending on the year of marriage. Property taxes should also be examined to determine if refunds are applicable.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.